Warranty v. Service Contract

Every day most of us hear the word warranty. Most of the time it is with the annoying car extended warranty sellers from the robocalls. Along with vehicles, there are home warranties, product warranties, and other items that which companies attempt to sell along with a customer good. Although the word warranty, these are actually service contracts.

Usually, a warranty comes with a product when it is sold to you. For instance, you purchase a new car you get a warranty with that vehicle. When you purchase new flooring you usually get a warranty. These are really warranties. A warranty comes with the item purchase upon the sale and apart of the product. Warranties are included with the price.

A service contract is the purchase of an item that is an addition unto the product. An extended car warranty is an example. It is separate from the manufacture of the product. American Home Shield does not come apart of the house. You purchase it separate.

A warranty and a service contract are distinct creatures that are treated differently under law. Different law applies to warranties than service contract.

This does not mean you have no cause of action against a service contract. There are laws that can protect you. A service contract is covered by the Magnuson-Moss Warranty Act. Your state may have a good Unfair Deceptive Practices Act. In Mississippi, this act is not worth the paper it is written on so we have to look at other laws. Finally, you have state statutory law or common law breach of contract claims.

If you a service contract make sure you read it to include the fine print. There are several exclusions under them. Most of them do their best to deny coverage. Most have arbitration clauses which demands arbitration of the claims, outside court. Some have certain state law that dictates what law applies and the time period for filing a claim. Be aware of all these issues, and if you have to, seek legal counsel for help.